'Respondents' comments continue to be mixed, with some uncertainty; however, the majority indicate a positive outlook on business conditions and the overall economy .' - Anthony Nieves, ISM

Economic activity in the US services sector rose unexpectedly last month, official figures showed on Friday. The Institute for Supply Management reported its Purchasing Managers' Index for the services sector climbed to 57.6 in February, while market analysts expected the Index remain unchanged from the prior month's reading of 56.5 during the reported period. Any reading above the 50-point level indicates activity expansion in the services sector. Furthermore, the Non-Manufacturing Business Activity Index came in at 63.6, the highest level since February 2011, up from the previous month's 60.3. Data also showed the New Orders Index increased to 61.2, the highest since August 2015, following January's 58.6. The ISM said 16 out of 18 industries reported growth last month, adding that the share of companies expressing a positive outlook for the future rose markedly last month despite the existing uncertainty in the US economy. Economic activity contracted in the information industry and the real estate, rental and leasing industry in February.

After the release, the US Dollar hit its intraday high of 114.54 against the Japanese Yen but failed to maintain its gains as investors awaited a speech by the Fed Chair Janet Yellen in the day.

EUR/JPY - 120.43

Recent wave: wave v of (C) ended at 94.12 and major correction in wave A has ended at 149.79

Trend: Sideways

Original strategy:

Buy at 119.65, Target: 121.35, Stop: 119.05

Position: -
Target:  -
Stop: -

New strategy :

Buy at 119.65, Target: 121.35, Stop: 119.05

Position: -
Target:  -
Stop:-

As the single currency has retreated after rising to 121.19 on Friday, suggesting consolidation below this level would be seen and pullback to 120.00 is likely, however, reckon downside would be limited to 119.60-65 and bring another rise later, above said resistance at 121.19 would extend the rebound from 118.24 low for retracement of recent decline to 121.30-35 but overbought condition should limit upside to 121.90-00 and price should falter well below resistance at 122.52, bring another decline later.

In view of this, we are looking to buy euro on dips as 119.60-65 should limit downside. Below previous resistance at 119.47 would defer and risk weakness to 119.00-10 but reckon support at 118.67 would contain downside and bring further consolidation. Only below this support would signal the rebound from 118.24 has ended, bring retest of this level later. A drop below there would extend recent decline from 124.10 top to 118.00 and later towards 117.50.

Our latest preferred count is that wave (ii) is ABC-X-ABC which ended at 123.33 and wave (iii) is unfolding with wave iii ended at 100.77, followed by wave iv at 111.57 and wave v as well as the wave (iii) has ended at 97.04, followed by wave (iv) at 111.43 and wave (v) has ended at 94.12 which is also the end of the larger degree v, this also implied the major wave (C) has also ended there, hence major correction has commenced from there with (A) leg unfolding in its lower degree wave c which has possibly ended at 145.69. Under this count, A-B-C wave (B) has commenced with A leg ended at 136.23, wave B at 143.79 and wave C has possibly ended at 149.79.

Our larger degree count is that the decline from 139.26 is wave (C) and is sub-divided into a diagonal triangle i-ii-iii-iv-v with wave i - 105.44, wave ii- 123.33, wave iii - 97.03, wave iv - 111.43, followed by the final wave v as well as the end of wave (C) at 94.12, this also mark the bottom of larger degree wave B. Under this count, major rise in wave C has commenced as an impulsive wave with minor wave III ended at 145.69, wave V is still in progress for further gain to 150.00. Having said that, this so-called wave V could well be the first leg of larger degree 5-waver wave C and this wave C should bring at least a retest of wave A top at 169.97 (July 2008).

AUD/USD – 0.7603

Recent wave: Wave 5 ended at 1.1081 and major correction has commenced for fall to 0.7000 and then towards 0.6500-10

Trend: Near term up

New strategy :

Stand aside

Position: -
Target:  -
Stop:-

Despite last week’s anticipated selloff to 0.7543, as aussie found good support there and has rebounded again, suggesting consolidation above this level would be seen and recovery to 0.7630 cannot be ruled out, however, reckon upside would be limited to o0.7660-65 and bring another decline later. A break of said support at 0.7543 would signal the fall from 0.7741 top is still in progress, bring retrace,eat of recent upmove to 0.7512 but oversold condition should prevent sharp fall below previous support at 0.7493 and price should stay above support at 0.7449, bring rebound later.

As near term outlook is mixed, would be prudent to stand aside for now. On the upside, expect recovery to be limited to 0.7630 and price should falter below previous support at 0.7663, bring another decline later. Only break of 0.7700 would signal the retreat from 0.7741 (last month’s high) has ended and bring retest of this level first.

On the 4-hour chart, the move from 0.8066 is the wave 5 with i: 0.8860, ii: 0.8315, wave iii is an extended move ended at 1.0183, iv: 0.9706 and wave v has ended at 1.1081 (also the top of entire wave 5). The subsequent selloff is the major correction which is unfolding as ABC-X-ABC and 2nd A leg has ended at 0.8848, followed by a-b-c wave B which ended at 0.9758, hence, 2nd C wave is now in progress and indicated downside target at 0.7000 and 0.6950 had been met, so further fall to 0.6710-20 cannot be ruled out.

The pair extended pullback after Friday's rejection under daily cloud top at 114.80 and dipped to 113.56 (Fibo 38.2% of 111.67/114.73 upleg) so far.

Studies are mixed and show no clear direction in the near term. Initial support at 113.56 and next strong supports at 113.27 (converged 10/20/30 SMA's in bullish setup) should contain dips and keep hopes of fresh attempts higher in play, with daily cloud twist on Wednesday, supporting the notion.

Conversely, loss of 113.56/27 supports would risk further easing towards 113.00 and 112.84 (Fibo 61.8% of 111.67/114.73), break of which would confirm reversal

Res: 114.11, 114.51, 114.73, 114.94
Sup: 113.56, 113.27, 113.00, 112.84

Cable maintains bearish tone following last week's close in red and Friday's spike to fresh 7-week low at 1.2212. However, the pair failed to close below important support at 1.2260 (Fibo 61.8% of 1.1986/1.2704 rally) on the second attempt, lacking stronger bearish signal for resumption of bear-leg from 1.258 (24 Feb high) for now. Near-term price action may hold in extended consolidation before fresh attempts lower, with initial barrier at 1.2300 zone, holding for now. Converged falling 10/55SMA's at 1.2384/85) offer solid resistance, together with daily Ichimoku cloud that twisted higher and is currently spanned between 1.2379/95, where extended upticks should be capped. Break and close below 1.2260 pivot is needed to open 1.2156 (Fibo 76%) and increase risk of full retracement of 1.1986/1.2704 rally.

Res: 1.2300; 1.2348; 1.2379; 1.2395
Sup: 1.2260; 1.2212; 1.2155; 1.2119

The Euro was slightly lower in early Monday, after repeated probe above the top of thin daily Ichimoku cloud at 1.0620 (reinforced by Fibo 38.2% of 1.0827/1.0492 descend) failed.

Friday's strong rally which marked gains of over 1% left long bullish daily candle (the biggest one-day gain since 05 Jan), underpins bullish near-term structure for fresh attempts higher.

However, daily studies remain weak and keep the downside at risk. Lift above daily cloud (which is going to start widening on Tuesday), would face a cluster of barriers that may limit extended upside attempts.

Falling 30 SMA marks initial barrier at 1.0646, followed by daily Kijun-sen at 1.0660 and falling 100SMA at 1.0672.

Only sustained break higher would trigger extended retracement of 1.0827/1.0492 downleg.

On the downside, first pivot lies at 1.0572 (Fibo 38.2% of Friday's rally), ahead of daily Tenkan-sen at 1.0560, close below which would generate stronger bearish signal.

Res: 1.0620, 1.0646, 1.0660, 1.0672
Sup: 1.0591, 1.0572, 1.0560, 1.0542

EUR/USD

Current level - 10593

Friday's rebound above 1.0490 has reached 1.0630 resistance and the intraday bias is already slightly bearish, for a test of 1.0570 support area. Only a break through the latter will signal a renewal of the bearish bias for 1.0450. Crucial on the upside is 1.0680.

Profit-taking affects gold curbing silver and platinum

USD/JPY

Current level - 113.79

The intraday bias is negative after the recent peak at 114.75, for a test of 113.37 support. The latter should provide a reliable base for another upswing towards 115.+ area. 

GBP/USD

Current level - 1.2278

The downtrend has been reversed at 1.2212 and the intraday bias is slightly positive, for a corrective rebound before drowning towards 1.2110 area. Initial intraday resistance lies at 1.2325.

'The euro area's travails are largely due to lack of effective convergence, both before the financial crisis and since then.' – Benoit Coeure, ECB (based on Bloomberg)

Pair's Outlook

During the early hours of Monday's trading session the common European currency traded at the 1.06 level against the US Dollar. The rate was looking for support, as profit taking was taking place after the major jump, which occurred during Friday's trading session. During Friday's trading session the currency exchange rate jumped from 1.0504 to end the day at 1.0619. The reason for the jump was fundamental, as speeches from the FOMC members dictated the strength of the US Dollar. It is likely that by the end of the day the currency exchange rate will move to the 1.0582 level, where the weekly PP is located at.

Traders' Sentiment

SWFX traders are almost neutral on the pair, as 51% of open positions are long. Meanwhile, 57% of trader set up orders are set to sell.

'The old floor at $1.24 now becomes important resistance, though, before it, we suspect a recovery from the current stretched condition will be more limited.' – BBH (based on FXStreet)

Pair's Outlook

Some uncertainty in Yellen's speech of Friday caused the British currency to erase all intraday losses and end the day with a 33-pip rally against the US Dollar. Now the Cable faces an important psychological support, namely the 1.2250 level, as a breach would likely lead to a drop to the 1.20 major level. Even though technical indicators are giving mixed signals in the daily timeframe, the possibility of a recovery is also doubtful, as the 1.23 mark acts as a tough resistance, which the GBP/USD could struggle to overcome today. Ultimately, the Sterling is expected to retest the bearish trend-line again, before a plunge towards 1.20 could become achievable once again.

Traders' Sentiment

Today 61% of all open positions are long (previously 58%). At the same time, the number of purchase orders edged up from 48 to 59%.

'There's a lot of positive news now priced into the market, and I think we'll probably see some profit-taking, so I think we'll probably see the dollar weaken from here.' – Douglas Borthwick, Chapadelaine Foreign Exchange (based on Reuters)

Pair's Outlook

With the return of the risk-off sentiment, the US Dollar weakened against the Japanese Yen on Friday, managing to retain its position above the 114.00 handle. However, risk-aversion remains in the markets, thus, another leg down is anticipated. The nearest support rests circa 113.30, formed by the 20-day SMA, the weekly and the monthly PPs, which is to prevent the USD/JPY pair from edging lower today. Meanwhile, the pair appears to have formed a moderate ascending channel pattern, the upper border of which, along with the monthly R1, the 55-day SMA and the Bollinger band, represent immediate resistance circa 114.50.

Traders' Sentiment

There are 59% of traders holding long positions today (previously 60%), whereas the share of buy orders remains unchanged at 56%.